Industrial Growth Opportunities
industrial_growth_opportunities.RmdThe industrial growth opportunities dataset provides a breakdown of product development opportunities for Statistical Areas (Level 2) across Australia, for census years (2011, 2016, 2021). It is derived from the industrial comparative advantage dataset, also included in this package, and a State based model of economic complexity, developed by the Australian Industrial Transformation Institute at Flinders University, in collaboration with the Government of South Australia. These datasets, and their creation, are described below.
Industrial growth opportunities capture at a product level what industrial development would be:
- most beneficial for a region, and
- most suitable for a region, based on its industrial strengths.
Economic Complexity
Economic complexity modelling pioneered by Hidalgo and Hausmann (2009) is a tool which measures the industrial and productive knowledge present in a region based on the products that it exports with comparative advantage (Hausmann, Hwang, and Rodrik 2007; Hausmann et al. 2014; Hidalgo et al. 2007). Economic complexity is calculated using country-product export data, spanning the period 1995-2020, for more than 1,200 products (disaggregated by the 1992 version of the Harmonised System, called HS0), and more than 200 countries.
Economic complexity is highly predictive of both current and future economic growth. It reveals three key indicators for a region’s economic development:
- The productive capabilities present in a region,
- The similarity between these capabilities and those required to develop new products, and
- The benefit to a region’s complexity from the development of a new product.
The products included in the economic complexity data can be searched below.
Preliminary analysis of regional export data reveals which products (\(p\)) are exported with comparative advantage by which region (\(c\)). Regional Comparative Advantage (RCA) is measured through the Balassa Index and is defined by the share of exports of a product in a region relative to the share of exports of that product in global trade.
\[RCA_{cp} = \frac{X_{cp}}{\sum_{c}X_{cp}}/\frac{\sum_{p}X_{cp}}{\sum_{cp}X_{cp}}\]
A region is said to have comparative advantage in a product if \(RCA_{cp} >=1\).
The benefit to a region’s economic complexity from the development of a new product is quantified by the complexity outlook gain (COG). This quantifies how the development of a new product increases the number of opportunities for future diversification through the creation of new paths from existing products to more complex products.
Subnational Economic Complexity
For Australia, the smallest geographic region in which consistent and accurate export data is measured and made available is the state level. The Queensland Government Statistician’s Office provides a time series of state exports disaggregated by the 8-digit Australian Harmonised Export Commodity Classification (AHECC). The AHECC is a modified version of the Harmonised System, designed to capture and include products of specific importance to Australian industry. As such, it can be readily converted to the Harmonised System for inclusion in the country-product export data provided by the Atlas of Economic Complexity (2014). At the 6-digit level (the most disaggregated level available for international trade), the AHECC and HS are identical. Each year of state export data is converted from 6-digit AHECC to 6-digit HS using the United Nations Trade Statistics Correspondence Tables (UN Trade Statistics 2022).
More recent state export data uses a combination of different versions of the Harmonised System. The conversion algorithm first uses the oldest available version of the Harmonised System (HS0), to match the 6-digit AHECC. Where conversion between the AHECC and HS is unsuccessful (i.e., where the state export data uses a HS code more recent than those in the correspondence), all matches are kept, and the next version of the correspondence is used to find matches for the unsuccessful product codes. This is repeated until all AHECC codes are matched to HS 1992 codes. The state level economic complexity data from 2011 onwards is included in this package.
datatable(state_economic_complexity)
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